Moscow Hits Back at Europe's Proposal to Lend Immobilized Moscow's Cash to Kyiv

Kyiv remains depleting its funding to maintain its military and economy afloat, after close to 48 months of full-scale conflict with Russia.

From the EU's perspective, the remedy to filling Kyiv's budget hole of €135.7bn for the following biennium is found in assets belonging to Russia that are frozen located within Belgian bank Euroclear, and EU leaders seek to sign that off at their EU leaders' conference next week.

Russian officials state the EU plan would be an illegal seizure, and Russia's central bank announced on Friday it was initiating legal action against Euroclear in a Moscow court even before a definitive agreement is made.

'Just' to Employ Moscow's Assets, Say Kyiv and Brussels

In total, Russia has approximately €210bn of its assets frozen in the EU, and €185bn of that is held by Euroclear.

European and Ukrainian authorities maintain that those funds should be used to rebuild what Russia has devastated: The European Commission terms it a "loan for reparations" and has devised a plan to support Ukraine's economy to the tune of €90bn.

"It is appropriate that the assets frozen from Russia should be used to reconstruct what Russia has destroyed – and that that capital then becomes Ukraine's," remarks Ukraine's Volodymyr Zelensky.

Germany's leader Friedrich Merz argues the assets will "help Ukraine to protect itself efficiently against any future Russian attacks".

The legal move by Moscow was expected in Brussels. But it is not only Moscow that is concerned.

The Belgian government is anxious it will be saddled with an enormous bill if it all goes wrong, and Euroclear CEO Valérie Urbain says using the assets could "destabilise the international financial system".

Euroclear also has an roughly €16-17bn immobilised in Russia.

The leader of Belgium Bart de Wever has set the EU a series of "rational, reasonable, and justified conditions" before he will agree to the reparations plan, and he has left open the possibility of legal action if it "carries significant risks" for his country.

The Details of the EU's Proposal?

European Union officials is under pressure prior to next Thursday's summit to agree on a compromise that Belgium can agree to.

Previously the EU has refrained from using the principal funds directly but since last year has paid the "windfall profits" from them to Ukraine. In 2024 that was €3.7bn. Juridically, using the profits is seen as safe as Russia is subject to sanctions and the earnings are not Russian sovereign property.

But foreign defense assistance for Ukraine has slipped dramatically in 2025, and Europe has found it difficult to cover the deficit resulting from the US decision to all but stop funding Ukraine under President Donald Trump.

There are presently two EU plans designed to supplying Ukraine with €90bn, to pay for two-thirds of its funding needs.

• Option one is to borrow the funds on the markets, guaranteed by the EU budget as a surety. This is Belgium's first choice but it needs a unanimous vote by EU leaders and that would be problematic when Hungary and Slovakia are against funding Ukraine's military.
• This makes the other option providing a loan of Ukraine cash from the frozen Russian funds, which were at first held in securities but have now mostly turned into cash. That funding is owned by Euroclear held in the European Central Bank.

The European Commission recognizes Belgium has valid worries and claims it is confident it has dealt with them.

The plan is for Belgium to be safeguarded with a assurance covering all the €210bn of Russian assets in the EU.

If Euroclear incur losses of its own assets in Russia, the loss would be compensated from assets belonging to Russia's own settlement agency which are in the EU.

Should Russia targeted Belgium itself, any ruling by a Russian court would not be recognized in the EU.

As an important step, EU ambassadors are poised to endorse on Friday to permanently block Russia's central bank assets held in Europe permanently.

Previously they have had to vote by consensus every six months to renew the freeze, which could have meant a constant risk to Belgium.

The EU ambassadors are planning to use an emergency clause under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "immediate threat to the financial well-being of the union" continues.

Why Belgium is Remains On Board

The Belgian government is firm it remains a strong supporter of Ukraine, but identifies regulatory pitfalls in the plan and worries about being left to handle the repercussions if things fail.

A usually partisan political environment in this case has rallied behind Prime Minister Bart de Wever, who is facing pressure from other European officials.

"The Belgian economy is not large. Belgian GDP is around €565bn – think about if it would need to bear a €185bn bill," notes Veerle Colaert, professor of financial law at KU Leuven University.

While the EU might be able to arrange sufficient guarantees for the loan itself, Belgium fears an additional danger of being exposed to extra damages or penalties.

Prof Colaert also argues the requirement for Euroclear to provide a loan to the EU would breach EU banking regulations.

"Financial institutions need to adhere to capital and liquidity requirements and shouldn't put all their eggs in one basket. Now the EU is asking Euroclear to do exactly that.

"Why do we have these bank rules? It's because we want banks to be secure. And if things go wrong it would be up to Belgium to save Euroclear. That's a further cause why it's so crucial for Belgium to get absolute guarantees for Euroclear."

Europe Facing Strain from All Sides

There is no time to lose, warn several EU member states including those closest to Russia such as the Baltics, Finland and Poland. They argue the proposal to use Russian funds is "a fiscally viable and politically realistic solution".

"It is a decisive moment for us," says leading German conservative MP Norbert Röttgen. "Should we not succeed, I don't know what we'll do afterwards. That's why we have to succeed in a week's time".

Although Russia is adamant its money should not be accessed, there are further worries among EU officials that the US may want to deploy Russia's immobilized billions differently, as part of its own peace initiative.

Zelensky has indicated Ukraine is coordinating with Europe and the US on a recovery fund, but he is also cognizant the US has been talking to Russia about possible partnership.

A preliminary version of the US peace plan mentioned $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving